One of the quickest ways to boost revenues is to launch a new product or service. But it isn't easy and it isn't guaranteed. However there are things small business leaders can do to improve the odds of success.
DOES ANYONE WANT IT
The first thing a business leader should do is validate that the market is interested in her product. Unfortunately this is usually the LAST thing they do and it's done unwittingly after a lot of time and resources are spent making it.
Do your homework. Minimally you need to talk to some people who might need your product and find out if it will solve their problem. See if you can sell your product to three people before making plans to scale.
WHO WANTS IT
Get specific. Really specific. You may think you can sell this product to the masses, but it will be one individual person at a time. Facebook might be servicing one billion people, but I only care what it can do for me. Likewise, your future customers will not care how many people you sell to as long as your product or service helps them.
So when you are figuring out your target market, get so specific about the one person you can sell to. If you can sell it once, you can do it again, and again and again.
The product or service needs to provide a high value-to-cost ratio. This is pretty straight forward for a product that solves a problem. You can estimate how much time or money would it take to solve the problem without this product.
Let's say your company provides small engine service. A neighbor down the street can't seem to get his lawn mower started. He could:
- spend a couple hours troubleshooting the problem (time is very valuable)
- purchase a new one (premium price for a brand new unit)
- spend $100 to have you fix it our at least diagnose the full extent of the problem
Considering these options your $100 repair service provides a high value-to-cost ratio to your target market.
It's a common mistake for companies to think having the lowest price means they'll sell the most product. Not only is this untrue, but it can cause serious damage to your business. Seth Godin calls this strategy "the race to the bottom." Once you're at the bottom, there's no where else to go.
The sweet spot for your product pricing is to be competitive. This means consumers won't automatically ignore your product because it is too expensive (or too inexpensive) compared to the competition's product.
If you haven't examined your pricing in detail and are looking for a good pricing starting point, go mid-market. Find the cheapest and most expensive products, and start in the middle. At this price, is your margin adequate to sustain the business? If not, what premium features can you add to charge a premium price?
Knowing what people will pay doesn't end the conversation about pricing. If you can't be profitable at that price you'll go out of business.
Examine the material cost, labor and time to market. This is the most dangerous part of bringing a new product to market. If it takes too long or costs too much than you expect your business will suffer immense strain to keep it afloat.
FIND OUT WHY THEY BUY
Your product needs to solve a problem or satisfy some passionate interest. Consumers what to know exactly what they get when they buy from you. If it isn't obvious, they aren't going to buy.
Here's a simple comparison between Timex and Rolex. Both companies sell the same product, but one appeals to the need to know the time and the other appeals to the passion to have a timepiece.
The classic Timex tagline was, "it takes a lickin' and keeps on tickin'," demonstrating its durability. The slang indicates that while it may be inexpensive it will be reliable and meet your needs.
Contrast this with a Rolex. The Rolex brand has passionate, enthusiastic followers willing to spend tens of thousands of dollars to own one. Can the consumer get the same function from a Timex as a Rolex? Sure, but Timex does not meet the passion that Rolex does.
In the sea of products, what makes yours unique? It doesn't have to be 10x better or different than the rest of the market. It only needs to be 10% better. Or 10% easier to use. Or 10% more effective.
Ghirardelli Chocolates are better than Dove Chocolates which are better than Hershey's. It's easier to rent movies from Netflix than Redbox. LED lightbulbs last longer than incandescent.
If you make it this far in exploring the success of a new product it bodes well for your idea.
If you can't check off every step of this process then that's good, too. Think of the time, money and resources you could have spent chasing a product that wasn't going to be successful.
Now go out and find the next winning idea.
Armour Martin Consulting LLC provides premium online content to help business leaders grow confidently in their business and see results in 90 days.
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